Do You Know What You’re Worth? Asset Protection Tips

14 September 2020 • Brett Kelly • Your Money, Your Choice

We often hear that the most important things in life are priceless, and that’s true up to a point. You can’t put a dollar value on friendship, family, or good health or memories of good times. However, when it comes to business and finance, it is extremely important you and your small business accountant know exactly how much you are worth.

This might sound like a simple matter of crunching some numbers and balancing some books, but as we know from our many years of working with clients, there’s more to it than that.

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Your net worth is not only about knowing where you stand right now, it is also about your future and ensuring you have the right plans in place for asset protection and income in retirement.

Know your value

Most of us when we think of wealth accumulation think of houses, shares, savings, maybe an antique or artwork or three. But there’s actually a lot more to net worth than just the obvious balance sheet.

It also includes the value of a business, cars or boats and superannuation on the plus side of the ledger, and all loans, hire purchase arrangements, and credit card balances on the negative side. For this reason, net worth is an important consideration for financial institutions in determining your credit rating.

So knowing how much you are worth right now is very important if you are still building your assets and looking to obtain finance for business expansion, share market investment or buying property.

It is also fundamental in planning the path ahead so you can make the right decisions and increase your net worth so it pays appropriate dividends once you are ready to retire.

For many people, their main plan for retirement is superannuation. Data from the Australian Bureau of Statistics (ABS), however, shows that many Australians have superannuation balances that will leave them with less than $10,000 a year income in their post-work life. By taking a net worth-focused approach instead, you can put more eggs in your nest.

This is where a good small business accountant is invaluable. They can ask the right questions to build up a detailed Net Worth Report and then help you make workable and achievable plans to put your personal bottom line on an upward trajectory.

Let’s face it, none of us have “live in reduced circumstances” as a retirement goal!

We work with clients to produce a Net Worth Report that gives a clear picture of exactly how their financial universe is organised. That’s the first step.

The next step is creating structures and processes that will ensure your financial future stays organised and grows in the right direction.

This brings us to the topic of what many think of as a black hole in their financial affairs - tax.

Get smart about tax

There’s only two legal ways to pay less tax - earn less, or get smarter about your financial affairs. The former is not an attractive option for anyone, so let’s talk about the latter.

There are ways you can manage your income and investments that build your future wealth and still meet your legal taxation obligations. This is also where things can get really interesting, because there are more options available than just flinging dollars into a standard super fund account.

Trust your future

There’s a whole galaxy of options around trusts including property trusts, family trusts and personal self-managed superannuation trusts. The details can be complicated, but that’s where your small business accountant puts on their financial advisor hat and asks the right questions!

Some of these questions should probably include:

  • What is your goal for retirement?
  • Can you put an annual income figure on it?
  • How much time and energy are you willing to put towards planning for your future?
  • What is your asset protection strategy?
  • How organised is your financial universe right now?

By asking the right questions, your small business accountant can work with you to develop the best options and ensure all the right legal details have been considered. The result will be a clearer idea of how much you are worth today, and, perhaps more importantly, how much you will be worth tomorrow.

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